Greg Adams: Typically dividend-focused funds tend to skew a little bit more towards the value side of the ledger. But this is a fund from Alger, which is known as a growth-investing firm, so we have a little bit more of a growth focus in what we do in this fund. I think this is also a particularly interesting time to be focused on dividends and dividend growth.

Wally Forbes: Definitely.

Adams: Dividends were very out of favor for much of the '90s and even into the early part of the 2000s. While payout ratios remain historically low, we have started to see a big pickup in dividend growth over the last year or so.

We think managements are increasingly focused again on dividends, and with so much cash sitting on balance sheets in corporate America and pretty significant free cash flow generation, we think there's continued ample opportunity for dividend growth. So that's an area we're very focused on.

Forbes: It's a pleasant background that so many companies have a lot of money and that they're looking at the possibilities of sharing it with their shareholders.

Adams: Exactly. And we think that's going to continue. We have three buckets. First, what we call the "Dividend Leaders," which are companies with dividend yields nicely above the S&P 500. Second "Dividend Growers," which are companies that are growing their dividends at well above average rates and doing that consistently. Third and I think most importantly, what we call the "Kings of Cash Flow.” These are the companies that are very attractive on a free-cash-flow-to-enterprise value basis. In order to initiate a dividend, pay a dividend, grow that dividend, you need to be generating the free cash flow to support it. So, that's really the foundation of what we do.

Forbes: And at this point, do you have a few more to look at than normally?

Adams: Yes. I think the technology sector is a great example. Ten or twelve years ago, technology companies were very loath to pay dividends. But you fast-forward to today and many of the companies in the technology sector -- larger cap companies -- now do pay dividends. They've been growing those dividends, and they're generating lots of free cash flow to support continued dividend growth. So, we think there are a lot of opportunities.

Forbes: Great. Maybe you can specify some of them?

Adams: One company I would highlight just recently initiated a dividend and that's Delphi Automotive (NYSE: DLPH), a large global auto parts company. They initiated a dividend at the end of February. The yield on the company is about 1.6%. But this is a company that's generating lots of free cash flow and they're very focused on returning that cash to shareholders through dividends and buybacks.

We estimate that over the next three to four years they can generate about $1.0 billion in annual free cash flow, which gives you a double digit, free cash flow yield at current prices. We think you're likely to see steady annual dividend growth from the company since they have a lot of continued opportunity for growth in their business looking out over the next few years.

Forbes: Sounds good.

Adams: Another company that we like a lot now, an example of a King of Cash Flow, is a company not currently paying a dividend, but is in the technology space.

Forbes: But it’s not currently paying a dividend?

Adams: Exactly. It's Google (NASDAQ: GOOG). They're certainly generating more than enough free cash flow to ultimately support paying a dividend. We don't anticipate that's something that will be happening anytime soon, but as we look to the future, we think that that potential is there.

The company continues to grow very strongly. Obviously they are a dominant player in the online advertising market. What we think is particularly interesting is that, as online advertising increasingly shifts into mobile platforms, they will increase their share. And they just introduced a new program called Enhanced Campaigns, which integrates desktop and mobile advertising. We think that is going to improve results for them and leverage their position in mobile. So, we think there's a lot of growth potential there. And it continues to be a very big free cash generator.

Forbes: Very interesting that among dividend stocks you're looking at Google as a future dividend payer rather than a current payer.

Adams: Yes, we think that the growth rate there and the free cash generation are very attractive and ultimately could support a reasonable dividend.